TR 2017/4 Income tax: taxation of rights and retail premiums under renounceable rights offers where shares held on capital account

https://www.ato.gov.au/law/view/document?DocID=TXR/TR20174/NAT/ATO/00001&PiT=99991231235958

7. An Eligible shareholder's Entitlements are 'rights' acquired from the Company for the purposes of section 130-45 of the ITAA 1997. Accordingly, an Eligible shareholder is taken to have acquired the rights when it acquired the original shares. Therefore, any capital gain may represent a discount capital gain so far as the Eligible shareholder's original shares have been held for 12 months or more.

20. The Retail Premium is the capital proceeds from the event because it represents money received in respect of the transfer. As Entitlements are granted to Eligible shareholders for nil consideration, the cost base of an Entitlement would generally be limited to any incidental costs. 

Taxing retail premiums

QC 21832

Last modified 17/06/24

Generally, where individual retail investors hold shares on capital account and a resident individual shareholder receives a retail premium, it will constitute a capital gain.

A shareholder will make a capital gain if the retail premium amount exceeds the cost base of the entitlement, generally being incidental costs.

A shareholder is taken to have acquired the rights when it acquired the original shares. Therefore, any capital gain may represent a discount capital gain if the eligible shareholder's original shares have been held for 12 months or more

Foreign

For foreign resident individual shareholders who are not holding investments which are taxable Australian property, the receipt of a retail premium amount won't be taxable.  

Retail premiums paid to ineligible shareholders are not dividends.